The multibillion-dollar proposal for oil exploration in the frontier Great South Basin is over after cornerstone companies United States giant Exxon Mobil and partner Todd Energy relinquished their permit yesterday, citing technical risks and lack of a third partner.
Austrian-based heavyweight OMV retains its separate Great South Basin permits and has until January to make a decision on whether to test drill, or similarly drop its permit.
Hopes were high that renewed exploration of Great South Basin, which last attracted the drilling of nine exploration wells in the 1970s and '80s, could herald a new era of exploration and the southern economies.
However, Todd Energy managing director Richard Tweedie said yesterday the "high technical risk", the difficult operating environment in the Great South Basin and the partnership's inability to attract another partner prompted the surrendering of its permit back to permitting agency Crown Minerals.
"The data indicates the acreage has a high technical risk, and this is further amplified by the remote location and the harsh operating environment," Mr Tweedie said in a statement.
Exxon's exit comes at a time when the Government has recently been talking up the prospectivity of 18 basins within New Zealand's 5.7 million sq km of seabed in its exclusive economic zone.
Drilling in the Great South Basin meant companies would be drilling in depths on average of 750m, but which extend to more than 1200m and also faced the likelihood of notorious weather conditions, mountainous seas and possibly icebergs.
In July 2007, five-year permits for six of a total 40 Great South Basin exploration blocks were awarded to two consortiums; US Exxon Mobil (90%), the world's largest non-government oil company, and Todd Exploration New Zealand (10%).
The other consortium is headed by OMV New Zealand Ltd, of Austria, and includes partners PTTEP Offshore Investment, of Thailand (36%), and Mitsui Exploration and Production Australia, of Japan (28%).
Had exploration drilling by the separate consortiums gone ahead it was estimated the pair would have spent up to $1.2 billion.
To date they have run several thousand kilometres of ship-borne seismic testing.
Last month, at the New Zealand Petroleum Conference in Auckland, OMV called on the Government for a review to allow for initial frontier exploration permits to move from five-year to eight-year timeframes due to the remoteness, depths, lack of historical data and higher costs.
Until OMV comes forward with a drilling decision, all eyes will be on permits in the Canterbury Basin, about 65km off the coast of Dunedin, where US giant Anadarko and Australian-listed Origin Energy have said they want to be test drilling by the end of 2011.
